August 29th 2005 Monday CME Emini - ESU05 10 Min I spotted this Bearish Hammer and placed a limit order at its open 1207.25 to sell. The price then went down to 1026.25 without filling my price. I then cancelled the limit order. NihabaAshi, would you trade this signal or you think this is not a valid signal or you think its valid but for some reason, you wouldnt trade? My justification for this Bearish Dark Inverted Hammer is as follows:- 1) There is a White WRB. 2) Its upper shadow engulfs the prior body. For live recording, what time frame and how many charts in a window will you recommend?
No...its not a Bearish Dark Inverted Hammer pattern signal that I would trade. (see my annotated chart attachment of your chart) * Compare the Dark Inverted Hammer (sub-group reversal signal) to the most recent white WRB. I believe you were comparing it to the WRB annotated as white WRB 1 instead of to the one annotated as white WRB 2. Also, WRB's represent a shift in supply/demand and/or candlestick s/r levels. Thus, the Open of the white WRB represents temporary support. More importantly...another criteria is the following... * Any intervals between the white WRB and Dark Inverted Hammer... If the intervals have a long lower shadow...that long lower shadow must not test (equal or less than) the Open of the white WRB. In your chart example...the interval between the white WRB 2 and the Dark Inverted Hammer had a long lower shadow and it tested the Open of the white WRB 2. Therefore, its not a valid trade and its a trade that has found some support... Enough support to possibly encourage buyers to step to the plate and drive prices higher. Thus, the long lower shadow that bounced off its own lows of its interval and at the same time it bounces off the Open of a white WRB... Not a good time for Shorts to be hanging around (pun intended). However, the criteria about the long lower shadow that's not allowed to test the Open of the white WRB... Only applies to the sub-group reversal signal and not to the sub-group continuation signal. As for chart intervals...I follow different chart intervals. Just pick any interval your comfortable with but make sure its more than one chart interval to reduce the odds of missing Hammer pattern signals. However, if your going to get fixated on one chart interval only... Learn about candlestick blending or de-blending to allow you to visualize more than one chart interval eventhough your actually only using one chart interval. I'll talk about blending and de-blending later in this thread. Until that discussion occurs...here's a decent generic source (located at the lower part of that webpage): http://www.stockcharts.com/education/ChartAnalysis/candlesticks4.html As for how many charts you want to record...I can't make any recommendations because that's entirely dependent upon how many monitors you have and how quickly you can process information as efficient as possible without getting information overload... It's also dependent upon how powerful of a computer you have (ability to handle Camtasia without letting it eat up your CPU). Simply, if you can only handle watching 4 charts on one monitor... Your not going to learn how to see trade signals occur in realtime nor develop a feel for the price action in realtime if your recording 16 charts on 4 monitors. With that said...if you have the ability to monitor 16 charts on 4 monitors... Go for it. NihabaAshi
I don't like it because its body > Lower Shadow. Had it been a valid Bullish White Hammer pattern for me I would like to see a price pullback tomorrow prior to any attempts to go higher. It would have been that price pullback I would be waiting (hoping) that a trade signal appeared. Yet, as I said already...its not a valid Hammer pattern I would trade eventhough it may be valid to someone else. NihabaAshi
Reversing after a stop out should only occur after as a valid pattern signal to reverse against a very reliable pattern signal. (reversing a Long position into a Short position or vice versa) For example...you mentioned that you have a Hammer pattern strategy that's reliable somewhere around 75% of the time. It's those strategies that's worth developing a particular area of a trading plan called a contingency plan... Sometimes called a Plan B when Plan A didn't work. What I'm saying is that I don't think position reversals after a stop out should occur every time a trade doesn't work out... It should be a valid pattern signal that can occur anytime. Therefore, it should be a strategy itself with specific criteria for such. Thus, whenever your most reliable pattern signal begins to fail or fails (loss)... Not all of them will qualify as a trade reversal signal because the price action doesn't qualify for such. Something else to consider (something that's involved in my contingency plan)... A trade may qualify for a position reversal prior to the stop being hit. What I mean is that one of my criteria for a position reversal is not a stop being hit. Simply, my contingency plan is a strategy all by itself and it is specific for that particular price action... In this particular case...I have a contingency plan specific to Long Shadows which includes Hammer patterns. Although I will not discuss my contingency plan here (its part of that in-depth trade management discussion)... I will post a chart example of such via a recent failed Bullish Dark Hammer pattern in NYMEX Light Crude Oil (CL) and you should be able to see some comparison in the price action on my chart where my contingency plan kicked in... To your EurUsd chart where you reversed your trade position... A profitable trade reversal for you. http://charts.dacharts.com/2005-08-27/0826-SAR.png However, the difference is that your contingency plan was activated upon a stop being hit... Whereas my chart example of NYMEX Light Crude Oil (CL) shows the contingency plan being activated prior to a stop being hit for a loss... Long position being reversed into a Short position with the help of Hurricane Katrina. Thus, as I mentioned before...a contingency plan (trade position reversal) should not be dependent upon a stop being hit... It should be a strategy itself that can occur sometimes regardless if your at a small profit, small loss (before stop is hit for a bigger loss) or upon a stop being hit for a loss. NihabaAshi
If your question is directed to me... I talked about that type of Inverted Hammer in this thread already. * I don't trade White Inverted Hammers because I had too many problems with them many years ago and just haven't sat down to re-develop a reliable trading plan for trading them. * The body must be > Lower Shadow. In your chart example the Body < Lower Shadow. However, you may want to contact ransome3000 because he's the one that trades them and probably can better answer your question than me. Here's the link to the discussion in this thread between ransome3000 and I... http://www.elitetrader.com/vb/showthread.php?s=&threadid=52880&perpage=5&pagenumber=17 I eventually (many years ago) came to the conclusion that I couldn't trade Bearish White Inverted Hammers the same way I was trading Bearish Dark Inverted Hammers. Also, without going into an in-depth discussion about White Inverted Hammers especially via the fact that I don't trade them... If and when I do re-approach them in trying to develop a trading plan for them... I will first test them the way I trade White Shooting Stars in that the intervals after the White Line will be part of the Pattern and Entry Signal. Simply, don't trade the White Inverted Hammer nor a White Shooting Star without involving the intervals after it as part of the Pattern or Entry Signal. Once again as a reminder...I trade the following Hammers: * Bullish White Hammers * Bullish Dark Hammers * Bearish Dark Inverted Hammers Thus, if you have questions about a different type of Hammer pattern... Hopefully one of the other candlestick traders that are viewing this thread will help you via discussing their Hammer tactics here or via private message. NihabaAshi
Hi sunnyskies, I'm just going to make a suggestion here about your approach to White Inverted Hammers since you have an interest in them... You could approach them as if they are bullish continuation signals instead of as a bearish reversal signal. Nothing concrete behind the above suggestion... You just don't want to leave any stone unturn as you try to develop a trading plan for it. NihabaAshi
August 30th Tuesday NYMEX Light Crude Oil - CL Bullish White Hammer Pattern Sub-group: bullish continuation When Oil is the talk of the town for whatever reason... Do not ignore Oil's price action regardless if your trading either the ER2, ES, NQ, YM, DAX, DJstoxx50, FTSE100 or CAC40. In fact, take a very close look at the above trading instruments between 4am - 5am est today when Oil produced that Bullish White Hammer pattern on the 60min chart... You could either go Long Oil, Short Eminis or do both. Simply, when Oil is the talk of the town like it has been due to the reaction to Hurricane Katrina... Pay close attention to the price charts of Light Crude Oil (CL) or Light Crude Oil e-miNY (QM). By the way...Crude e-miNY (QM) also had a Bullish White Hammer pattern. NihabaAshi